A company issues $896,000 of 5-year, 5% bonds on January 1, 2021. The bonds pay interest annually.

1) Calculate the issue price of the bonds using a market rate of 4%

2) Record the bond issue

3) Prepare an effective interest amortization table for the bonds

4) Prepare the journal entries to record the first three interest payments. Ignore any year-end accruals of interest

5) Assuming the company has an October 31 year end, prepare the adjusting entry for interest on October 31, 2021.

Explain the audit steps for detecting the following issues. For each of your answers provide two possible steps you could utilize to identify the item. For each, discuss what the risk may exist, and why an investor would want assurance that an auditor has covered those risks.

(e)                    Unrecorded purchase of investment securities

(f)                    Unrecorded stock compensation expense

(g)                   Unrecorded covenant violations

(h)                   Unrecorded contingent liability

Lahser Corp. produces component parts for durable medical equipment manufacturers. The controller is building a master budget for the first quarter of the upcoming calendar year. Selected information from the accounting records is presented next:

a. Accounts Receivable as of January 1 are $59,200. Selling price per unit is projected to remain stable at $11 per unit throughout the budget period. Sales for the first six months of the upcoming year are budgeted to be as follows:

b. Sales are 20% cash and 80% credit. All credit sales are collected in the month following the sale.

c. Lahser Corp. has a policy that states that each month’s ending inventory of finished goods should be 10% of the following month’s sales (in units).

d. Three pounds of direct material is needed per unit at $2.30 per pound. Ending inventory of direct materials should be 20% of next month’s production needs.

e. Monthly manufacturing overhead costs are $5,650 for factory rent, $2,900 for other fixed manufacturing costs, and $1.10 per unit produced for variable manufacturing overhead. All costs are paid in the month in which they are incurred.

4. What is the budgeted direct materials cost for the first quarter? (1 point)

ACT 5140 – Accounting for Decision Makers HW #1 Directions: Answer all the questions. Please submit your work in Word or PDF formats only. You can submit an Excel file to support calculations, but please “cut and paste” your solutions into the Word or PDF file. Be sure to show how you did your calculations. Also, please be sure to include your name at the top of the first page of your file. Question #1 • Using the accompanying financial statements (Excel Workbook), assess The Home Depot concerning liquidity, solvency, profitability, and stock performance. For each area, you should calculate the ratios from the “Ratios for Home Depot file “ and provide a brief analysis of the ratios calculated. You do not need to perform vertical analysis for this assignment. I include historical stock price information and outstanding common share information below. You do not need to look beyond the financial statements to complete this assignment. Fiscal Year Ended 2/1/2015 2/2/2014 2/3/2013 1/29/2012 Adjusted Closing Price $103.34 $74.44 $63.87 $41.67 Common Shares Outstanding (millions) 1,307 1,380 1,486 1,523 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865 HOME DEPOT INC $ in millions Year Ending 2/1/2015 2/2/2014 2/3/2013 1/29/2012 OPERATING ACTIVITIES: Net earnings $6,345 $5,385 $4,535 $3,883 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,786 1,757 1,684 1,682 Stock-based compensation expense 225 228 218 215 Goodwill impairment (323) 0 97 0 Changes in Assets and Liabilities, net of the effects of acquisition and disposition Receivables, net (81) (15) (143) (170) Merchandise inventories (124) (455) (350) 256 Other current assets (199) (5) 93 159 Accounts payable and accrued expenses 244 605 698 422 Deferred revenue 146 75 121 (29) Income taxes payable 168 119 87 14 Deferred income taxes 159 (31) 107 170 Other long-term liabilities (152) 13 (180) (2) Other 48 (48) 8 51 Net cash provided by operating activities $8,242 $7,628 $6,975 $6,651 INVESTING ACTIVITIES: Capital expenditures (1,442) (1,389) (1,312) (1,221) Proceeds from sales of investments 323 0 0 0 Proceeds from sale of business 0 0 0 101 Payments for business acquired (200) (206) (170) (65) Proceeds from sales of property & equipment 48 88 50 56 Net cash used by investing activities ($1,271) ($1,507) ($1,432) ($1,129) FINANCING ACTIVITIES: Proceeds from short-term borrowings, net 290 0 0 0 Proceeds from long-term borrowings, net of discount 1,981 5,222 0 1,994 Repayments of long-term debt (39) (1,289) (32) (1,028) Repurchases of common stock (7,000) (8,546) (3,984) (3,470) Proceeds from sales of common stock 252 241 784 306 Cash dividends paid to stockholders (2,530) (2,243) (1,743) (1,632) Other financing activities (25) (37) (59) (218) Net cash used by financing activities ($7,071) ($6,652) ($5,034) ($4,048) Change in Cash and Cash Equivalents ($100) ($531) $509 $1,474 Effect of exchange rate changes on cash and cash equivalents (106) (34) (2) (32) Cash and cash equivalents at beginning of year 1,929 2,494 1,987 545 Cash and cash equivalents at end of year $1,723 $1,929 $2,494 $1,987 SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR Interest, net of capitalized interest $782 $639 $617 $580 Income taxes $3,435 $2,839 $2,482 $1,865

No hand writing and pictures please.

1. Illustrate the concept of ROI with suitable numerical example. How ROI is different from Residual Income? Explain in your own words.

roduction Budget and Direct Materials Purchases Budgets

Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows:

Company policy requires that ending inventories for each month be 15% of next month's sales. At the beginning of January, the inventory of peanut butter is 38,000 jars.

Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy requires that ending inventories of raw materials for each month be 20% of the next month's production needs. That policy was met on January 1.

Required:

1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total.

Feedback

The production budget is in units. Fill in the units for sales from the amounts provided. The desired ending inventory is added to the number of units to be produced and is calculated based on future sales. Beginning inventory is subtracted to determine units to be produced. Beginning inventory is given for the first month and is carried forward from the previous month for later months.

Review the "How to Prepare a Production Budget" example in the text.

2. Prepare a direct materials purchases budget for jars for the months of January and February.

Feedback

Fill in the units produced from Requirement 1.

Production in units x Materials per unit = Direct Materials Needed for Production

The desired ending inventory for materials is added to the materials to be purchased and is calculated based on future production. Note that the percentage of desired materials inventory does not match the percentage of desired completed inventory. Beginning inventory is calculated from current month production for the first month and is carried forward from the previous month for later months.

Direct Materials Needed for Production + Direct Materials in Desired Ending Inventory – Direct Materials in Beginning Inventory = Purchases

Review the "How to Prepare a Direct Materials Purchases Budget" example in the text.

Prepare a direct materials purchases budget for peanuts for the months of January and February.

77.6%

28.7%

17.0%

30.9%

The December 31, 2021, adjusted trial balance for Fightin' Blue Hens Corporation is presented below.
  

3. Prepare a classified balance sheet as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)
  

Using the list of accounts below, construct a chart of accounts for a merchandising business that rents out a portion of its building, and assign account numbers and arranging the accounts in balance sheet and income statement order (“1” for assets, and so on). Each account number should have three digits. Contra accounts should be designated with a decimal of the account (100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

Acc. No Description

Smith Inc. engaged in the following transactions in 2019.

Smith Inc. Journal General – External Transactions                                             

Please explain the answer step by step:

Computing Average Unit Costs
The total monthly operating costs of Chili To Go are:

$8,000+ $0.30X

where

X = servings of chili

(a) Determine the average cost per serving at each of the following monthly volumes: 100; 1,000; 5,000; and 10,000.

Round answers to one decimal place.

(b) Determine the monthly volume at which the average cost per serving is $0.70.
Answer servings of chili

PLEASE EXPLAIN THE ANSWER STEP BY STEP

Automatic versus Manual Processing
Photo Station Company operates a printing service for customers with digital cameras. The current service, which requires employees to download photos from customer cameras, has monthly operating costs of $5,000 plus $0.20 per photo printed. Management is evaluating the desirability of acquiring a machine that will allow customers to download and make prints without employee assistance. If the machine is acquired, the monthly fixed costs will increase to $10,000 and the variable costs of printing a photo will decline to $0.04 per photo.

(a) Determine the total costs of printing 20,000 and 50,000 photos per month.

(b) Determine the monthly volume at which the proposed process becomes preferable to the current process.
Answer

units

Lynda Corporation manufactures two typed of glass sheets: clear glass and colored glass. Department 1 produces clear glass sheets, some of which we sold as finished goods. Others are transferred to Department 2, which adds additional materials to the clear glass sheets to form colored glass sheets, which are sold and finished product. The company something something operation something systems.

During the period, 2 jobs, were completed. Job Alpha was for 10,000 clear glass sheets and required in $200,000 materials. Job Beta was for 5,000 colored sheets and called for materials of $100,000 in department 1 and additional materials of $40,000 in Department 2.

The company strictly adhered to a Just-In-Time (JIT) inventory system for work in process

Conversion costs for the period were as follows:

Department 1              $180,000

Department 2              $50,000

Calculate the cost per unit transferred to finished goods inventory for each job, Alpha and Beta

$_____________   $______________

Alpha                          Beta

Job Beta is being sold to the government on a cost-plus basis. The vice president of marketing suggests that the conversion costs from Department #1 could be allocated on the basis of materials costs, so that he can offer a lower price for Job Alpha.

What do you think of this idea? Does it sound right? Are there any other issues here? Would you advise the company to do this? Explain.

Please show all work!!

The variable costing concept removes fixed costs, which are uncontrollable, from the decision-making process (see variable costing income statement). This forces management to focus on the variable factors of production, sales revenue and variable costs. I remember learning this concept in economics at LBCC, where a company should shut down if a product’s price falls below variable cost and just incur fixed costs.

Have you ever heard the saying “The company loses $1.00 on every unit sold, but we are confident the losses can be made up on volume.” Really?

In theory, companies should not operate with a negative contribution margin (sales revenue-variable costs), but my guess is that some do especially in this economic environment?

Do you think companies actually operate (or produce products) with a negative contribution margin?